Malta Highly Qualified Persons – Tax Planning for High Income Earners

Malta introduced specific tax rules intended to attract top expertise and skills in the financial services, remote gaming and aviation sectors, to thus attract and recruit the highest qualified, experienced and senior professionals available globally.

Senior employees filling positions with companies licensed by the MFSA (Malta Financial Services Authority), the MGA (Malta and Gaming Authority) or the Authority for Transport in Malta (TM), may avail from tax benefits pertaining to the Highly Qualified Persons Rules. Malta’s success in securing an increasing number and quality of hedge funds, managers, insurers and similarly regulated entities depends largely on the ability of such entities to attract and recruit highly qualified, experienced and senior professionals available globally.

Such senior employees may opt to pay tax at the Flat Rate of 15% on employment income derived in respect of work or duties carried out in Malta (or in respect of any period spent outside Malta in connection with such work or duties).

Head of Research and Development (including Search Engine Optimisation and Systems Architecture);

Head of Marketing (including Head of Distribution Channels);

Head of Investor Relations;

Aviation Accountable Managers;

Aviation Continuing;

Airworthiness Inspectors;

Aviation Flight Operations;

Aviation Ground Operations Managers;

Aviation Training Managers.

Further to Legal Notice 141 of 2018, new eligible officers in the Assisted Reproductive Technology Sector have been included in the programme. These are:

Embryologist;

Responsible Person;

Lead Quality Manager.

Paying Tax on Malta Source Employment Income

In fact, a senior employee would be entitled to opt to pay tax on Malta sourced employment income at the flat rate of 15% if the senior employee:

is employed to fill a senior position (or to perform equivalent activities) and is in possession of professional qualifications or acceptable professional experience;

is entitled to remuneration of at least €82,881 (exclusive of the annual value of any fringe benefits) in terms of a contract of employment for the basis year 2017, as adjusted by the retail price index;

is in receipt of stable and regular resources which are sufficient to maintain him/herself and his/her family members without recourse to domestic social assistance;

resides in accommodation regarded as normal for a comparable family in Malta;

is not domiciled in Malta;

is in possession of a valid travel document;

is in possession of adequate health insurance;

does not benefit under alternative incentives available domestically in favour of investment services and insurance expatriate employees;

is protected as an employee under applicable Maltese laws.

The Terms of the Highly Qualified Persons Rules

In addition, in terms of the Rules, no further tax would be chargeable in respect of qualifying employment income exceeding €5,000,000. An individual eligible to opt to pay tax on employment income at the reduced rate of 15% (in terms of the Rules) would be required to apply to the MGA/MFSA/TM for a formal determination confirming eligibility. The eligible individual would then be required to submit a prescribed form (endorsed by the MGA/MFSA/TM) to the local tax authorities together with his/her tax return.

The Rules do not apply in respect of individuals who were employed under a contract of employment requiring the performance of duties in Malta for a period exceeding 2 years preceding 1 January, 2010.

Furthermore, certain additional restrictions apply in respect of EEA and Swiss nationals and citizens of non-EU Member States. Accordingly, the tax benefits under the Rules are available to EEA (including EU) and Swiss nationals for a consecutive period of 5 years (commencing in the year in which the tax payer is first liable to tax in Malta). Such EEA and Swiss nationals, who avail themselves of this tax benefit, shall be eligible upon application, for a one-time extension of 5 years, making their qualifying period a maximum of 10 years of assessment. Non-EU citizens benefit under the Rules for a consecutive period of 4 years (commencing in the year in which the taxpayer is first liable to tax in Malta). Third country nationals, who avail themselves of this tax benefit, shall be eligible upon application, for a one-time extension of 4 years, making their qualifying period a maximum of 8 years of assessment.

The one-time extension is not applicable to individuals who have been residing in Malta prior to the 1st of January 2008.

The 10 and 8 year maximum periods would be further reduced in respect of EEA and Swiss nationals and citizens of non-EU Member States who were employed under a contract of employment requiring the performance of duties in Malta up to 2 years prior to the 1st January, 2010.

FAQS

What is the Highly Qualified Rules Programme (HQP)?

Malta introduced these tax rules intended to attract top expertise and skills in the financial services, remote gaming and aviation sectors, to thus attract and recruit the highest qualified, experienced and senior professionals available globally.

Senior employees may opt to pay tax at the flat rate of 15% on employment income derived in respect of work or duties carried out in Malta (or in respect of any period spent outside Malta in connection with such work or duties).

What are the Senior Positions specified in the Malta HQP?

Chief Executive Officer;

Chief Risk Officer (including Fraud and Investigations Officer);

Chief Financial Officer;

Chief Operations Officer;

Chief Technology Officer;

Chief Commercial Officer;

Portfolio Manager;

Chief Investment Officer;

Senior Trader/Trader;

Senior Analyst (including Structuring Professional);

Actuarial Professional;

Chief Underwriting Officer;

Chief Insurance Technical Officer;

Odds Compiler Specialist;

Head of Research and Development (including Search Engine Optimisation and Systems Architecture);

Head of Marketing (including Head of Distribution Channels);

Head of Investor Relations;

Aviation Accountable Managers;

Aviation Continuing;

Airworthiness Inspectors;

Aviation Flight Operations;

Aviation Ground Operations Managers;

Aviation Training Managers.

Further to Legal Notice 141 of 2018, new eligible officers in the Assisted Reproductive Technology Sector have been included in the programme. These are:

Embryologist;

Responsible Person;

Lead Quality Manager.

How will a senior employee be entitled to opt to pay 15% tax on employment income?

A senior employee would be entitled to opt to pay tax on Malta sourced employment income at the flat rate of 15% if the senior employee:

is employed to fill a senior position (or to perform equivalent activities) and is in possession of professional qualifications or acceptable professional experience;

is entitled to remuneration of at least €82,353 (exclusive of the annual value of any fringe benefits) in terms of a contract of employment for the basis year 2016, as adjusted by the retail price index;

is in receipt of stable and regular resources which are sufficient to maintain him/herself and his/her family members without recourse to domestic social assistance;

resides in accommodation regarded as normal for a comparable family in Malta;

is not domiciled in Malta;

is in possession of a valid travel document;

is in possession of adequate health insurance;

does not benefit under alternative incentives available domestically in favour of investment services and insurance expatriate employees;

is protected as an employee under applicable Maltese laws.

What is the term of the HQP?

The tax benefits under the HQP are available to EEA (including EU) and Swiss nationals for a consecutive period of 5 years (commencing in the year in which the tax payer is first liable to tax in Malta). Such EEA and Swiss nationals, who avail themselves of this tax benefit, shall be eligible upon application, for a one-time extension of 5 years, making their qualifying period a maximum of 10 years of assessment. The one-time extension is not applicable to individuals who have been a resident in Malta prior to the 1st of January 2008. Non-EU citizens benefit under the Rules for a maximum consecutive period of 4 years (commencing in the year in which the taxpayer is first liable to tax in Malta).

How can I apply for the HQP?

An application with respect to the HQP may be submitted to the appropriate Authorities depending on the sector of employment. CSB Group will be able to assist you with the application process and the liaising with the authorities.

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COMPANY

CSB Group is a Malta based corporate services provider with expertise in corporate tax structuring, financial services, Malta company formation and company services, back-office services, professional investor funds, corporate law firm and fiduciary, corporate services and general administration to businesses and private clients worldwide.